The Editorial Notebook; United's Pioneering Pilots

By Peter Passell

Published: May 19, 1987

The plot is familiar: A corporate raider makes a surprise offer for a big company, claiming that management has lost its competitive drive. Scenting blood, Wall Street arbitrageurs bid up the share price by 20 percent. Management dismisses the offer as inadequate - and prepares for the worst by enlisting the aid of a ''white knight'' and voting ''golden parachutes'' for executives.

In this case, however, the characters are surprising. The target company, United Airlines, is the world's largest private air carrier. And the raider is one of United's own unions, the Air Line Pilots Association. The plot, too, offers a twist. Though the pilots hope to profit from the deal, their primary goal is to have their union fly in the unfriendly skies of deregulation.

United has stumbled in recent years. The big carrier has proved less savvy at attracting high-margin business travelers than arch rival American Airlines, and ineffectual at defending its market share against upstart Continental.

No one expects United to fail. But its problems have focused attention on a weakness United shares with other blue-chip carriers. In the 1970's, airline unions were able to double already hefty wages. That was no problem as long as the carriers enjoyed legal monopolies. But deregulation has since opened the market to competitors with lower labor costs.

Unionized carriers have responded with ''two-tier'' pay scales. Workers already on the payroll keep the hefty paychecks, while new hires get far less. A two-tier scale reduces average wages relatively slowly, however, and United remains saddled with the highest labor costs in the industry. Its pilots average $100,000 a year, a third more than Continental's. The pilots' union knows that management is determined to extract cuts in next year's bargaining. Thus, the takeover bid.

Rather than risk a long strike or make concessions to managers they loathe, the pilots prefer concessions to themselves. The union is seeking bank financing for a $4.5 billion buyout by pledging to invest some $300 million of the pilots' pension funds in the company and to take about 35 percent of compensation in the form of stock.

Will it fly? Many obstacles remain - not least, the reluctance of United's other employees to work for the pilots. But the plan offers a unique way of avoiding a mutually costly showdown between the overpaid pilots and United's struggling management. Labor relations history may be in the making.